“The requirements bring about slightly higher costs for
the banks, which in turn affects interest rates for non-
financial corporations and households,” the FSA said. “At the
same time, the stricter requirements will lead to the banks
being viewed as stable and resilient, which gives cheaper
funding and partly counteracts the effect of higher costs.”

The proposed requirements, which are now subject to public
review, would mean the largest banks would need to set aside an
additional 20 billion kronor ($3 billion), including 7.2 billion
kronor for Swedbank and 5.5 billion kronor for Handelsbanken,
the regulator estimated. Risk weights in Sweden have “dropped
sharply” since 2007, when banks were allowed to use internal
models based on Basel II, the FSA said. The weights in Sweden
are among the lowest in Europe and compare with an average of
more than 15 percent in Germany, according to the central bank.

Consumer Debt

Sweden’s central bank has warned against rising consumer
debt levels, which have grown to about 170 percent of disposable
incomes. Household debt by that measure mustn’t exceed 200
percent, Governor Stefan Ingves said this month. The bank
predicts the level will remain largely unchanged at about 170
percent through 2015, after having risen from 90 percent in
1996, provided it doesn’t cut rates further.

While household lending growth has slowed in Sweden since a
cap on mortgages was introduced in 2010, mortgage lending growth
still stood at an annual 4.6 percent in the third quarter. While
that’s the slowest since at least 2002, the pace is exceeding
the euro-area where growth was close to zero, according to the
Swedish FSA.

Swedish regulators are also tightening capital ratio
requirements. The banks already have ratios that exceed the 12
percent core Tier 1 capital they need to hold by 2015, and next
year’s 10 percent target. Handelsbanken and Swedbank had core
Tier 1 capital ratios of 17.9 percent and 17.3 percent,
respectively, at the end of September. SEB’s core Tier 1 ratio
stood at 16.5 percent, while Nordea’s was 12.2 percent.

The new rules would lower Swedbank’s core capital ratio by
1.5 percentage points and Handelsbanken’s by 1.1 percentage
points, the FSA said. Nordea would need to set aside 3.4 billion
kronor and SEB 2.3 billion kronor, cutting their ratios by 0.2
percentage point and 0.4 percentage point, respectively. The
calculations haven’t been adjusted for the effects of Basel III.

“This is approximately what we had expected,” Peter
Borsos, a spokesman for Swedbank, said by telephone. “We have
the capital we need, as we had set this aside already. Setting
aside more capital will marginally lead to higher costs for the
banks, which affects the rates for households.”